ABSTRACT
At the first Committee meeting after the Annual General Meeting a point was taken up which had first been raised 6 months earlier when management had announced that approximately 25% of sales were now exports and that these were to be priced at a special rate of 10% below the minimum domestic price (Committee Minutes 26.3.23). As more information became available, however, the labour representatives began to consider the effect of such a marketing strategy upon the scheme:
“Mr. Parrish asked a question in regard to foreign sales. It had been stated by the Finance Director that Foreign Sales in Period 3 other than through the subsidiary companies were made at a margin above the minimum selling value of 6 or 7%, whereas those made to subsidiary companies were at 11% below minimum selling value. Mr. Parrish asked the reason for the wide difference between the prices at which we sold for export to subsidiary companies and to others; was it that sales could not be effected in the markets covered by the subsidiary companies at any higher prices or that the difference (or more) was expected to be made as profit by the subsidiary companies?
Mr. H.G. Jenkins replied that selling to the subsidiary companies at cut prices was at present necessary to secure any considerable volume of business; at the same time there is evidence that the subsidiary companies are beginning to trade more profitably. Mr. H.G. Jenkins reminded the Committee that the question of bringing their profits and losses into the pool had not been lost sight of and that a proposal would be submitted shortly.”
(Committee Minutes, 8.10.23) emphasis added. The apparent worries of the employee representative were that firstly, since the scheme incorporated the selling prices achieved for the products as an integral element of the bonus entitlement computations then any discounts below those allowed for by the standard scale would reduce the possibility of the standard sales revenue being achieved and thus the likelihood of bonus payment. In addition, they realised that the location of profit recognition was also critical for the scheme and that the significant price differential between goods exported and sold through subsidiaries (whose profits were not incorporated into the scheme) and those to other overseas clients, gave at least some potential for management to arbitrarily influence the level of profits of the parent company and hence the amount of bonus payable under the terms of the scheme.